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A Review of the Earnings Management Literature and its Implications for Standard Setting

36 Pages Posted: 15 Mar 1999  

Paul M. Healy

Harvard Business School; National Bureau of Economic Research (NBER)

James Michael Wahlen

Indiana University - Kelley School of Business - Department of Accounting

Date Written: November 1998

Abstract

In this paper we review the academic evidence on earnings management and its implications for accounting standard setters and regulators. We structure our review around questions likely to be of interest to standard setters. Specifically, we review the empirical evidence on which particular accruals are used to manage earnings, the magnitude and frequency of any earnings management, and whether earnings management affects resource allocation in the economy. Our review identifies a number of important opportunities for future research on earnings management.

JEL Classification: M41, M43, M44

Suggested Citation

Healy, Paul M. and Wahlen, James Michael, A Review of the Earnings Management Literature and its Implications for Standard Setting (November 1998). Available at SSRN: https://ssrn.com/abstract=156445 or http://dx.doi.org/10.2139/ssrn.156445

Paul M. Healy

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-1283 (Phone)
617-496-7387 (Fax)

James Michael Wahlen (Contact Author)

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2658 (Phone)
812-855-8679 (Fax)

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